UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from          to
 Commission File Number 001-31574
 AMERIGROUP Corporation
 (Exact name of registrant as specified in its charter)
 Delaware(State or Other Jurisdiction of 
Incorporation or Organization)
    
    54-1739323(I.R.S. Employer
Identification No.)4425 Corporation Lane,
    
    23462Virginia Beach, VA
    
    (Zip Code)(Address of principal executive offices)
 Registrants telephone number, including area code:
(757) 490-6900
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



AMERIGROUP Corporation And Subsidiaries
 Table of Contents
 Part I. Financial InformationItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2008
and 2007
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the nine months ended September 30, 2008
    
    
    5Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    25Part II. Other InformationItem 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3. Defaults Upon Senior Securities
    
    
    29Item 4. Submission of Matters to a Vote of Security Holders
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    29
  2




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##### 



Part I. Financial Information
 
 Item 1. Financial Statements
 AMERIGROUP Corporation And Subsidiaries
 
 Condensed Consolidated Balance Sheets
 (Dollars in thousands, except per share data)
 (Unaudited)
 September 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    684,856
    
    
    $
    487,614Short-term investments
    
    
    161,660
    
    
    
    199,947Restricted investments held as collateral
    
    
    
    
    
    
    351,318Premium receivables
    
    
    72,460
    
    
    
    82,940Deferred income taxes
    
    
    25,517
    
    
    
    23,475Provider and other receivables
    
    
    23,816
    
    
    
    43,913Prepaid expenses and other
    
    
    28,440
    
    
    
    39,001Total current assets
    
    
    996,749
    
    
    
    1,228,208Long-term investments
    
    
    412,486
    
    
    
    379,733Investments on deposit for licensure
    
    
    94,042
    
    
    
    89,485Property, equipment and software, net
    
    
    102,431
    
    
    
    97,933Deferred income taxes
    
    
    10,683
    
    
    
    12,075Other long-term assets
    
    
    17,402
    
    
    
    18,178Goodwill and other intangible assets, net
    
    
    250,567
    
    
    
    263,009Total assets
    
    $
    1,884,360
    
    
    $
    2,088,621LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Claims payable
    
    $
    528,042
    
    
    $
    541,173Accounts payable
    
    
    3,200
    
    
    
    6,775Unearned revenue
    
    
    41,543
    
    
    
    55,937Accrued payroll and related liabilities
    
    
    54,758
    
    
    
    47,965Accrued expenses and other
    
    
    57,838
    
    
    
    71,894Contractual refunds payable
    
    
    61,111
    
    
    
    47,329Current portion of long-term debt
    
    
    500
    
    
    
    27,567Current portion of capital lease obligations
    
    
    11
    
    
    
    368Total current liabilities
    
    
    747,003
    
    
    
    799,008Long-term convertible debt
    
    
    260,000
    
    
    
    260,000Long-term debt less current portion
    
    
    49,500
    
    
    
    101,458Other long-term liabilities
    
    
    14,150
    
    
    
    14,248Total liabilities
    
    
    1,070,653
    
    
    
    1,174,714Stockholders equity:Common
stock, $0.01 par value. Authorized 100,000,000 shares; issued and
outstanding 52,652,179 and 53,129,928 at September 30, 2008 and
December 31, 2007, respectively
    
    
    535
    
    
    
    532Additional paid-in capital
    
    
    425,390
    
    
    
    412,065Accumulated other comprehensive loss
    
    
    (2,030
    )
    
    
    Retained earnings
    
    
    414,171
    
    
    
    502,182838,066
    
    
    
    914,779Less treasury stock at cost (886,547 and 25,713 shares at September 30, 2008 and
December 31, 2007, respectively)
    
    
    (24,359
    )
    
    
    (872
    )Total stockholders equity
    
    
    813,707
    
    
    
    913,907Total liabilities and stockholders equity
    
    $
    1,884,360
    
    
    $
    2,088,621
  3




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##### 



AMERIGROUP Corporation And Subsidiaries
 
 Condensed Consolidated Statements of Operations
 (Dollars in thousands, except per share data)
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues:Premium
    
    $
    1,105,759
    
    
    $
    1,013,620
    
    
    $
    3,282,706
    
    
    $
    2,819,166Investment income and other
    
    
    17,624
    
    
    
    19,091
    
    
    
    58,696
    
    
    
    49,634Total revenues
    
    
    1,123,383
    
    
    
    1,032,711
    
    
    
    3,341,402
    
    
    
    2,868,800Expenses:Health benefits
    
    
    885,774
    
    
    
    840,749
    
    
    
    2,672,166
    
    
    
    2,342,905Selling, general and administrative
    
    
    161,520
    
    
    
    129,941
    
    
    
    454,134
    
    
    
    357,459Litigation settlement
    
    
    
    
    
    
    
    
    
    
    234,205
    
    
    
    Depreciation and amortization
    
    
    8,811
    
    
    
    7,744
    
    
    
    26,459
    
    
    
    23,596Interest
    
    
    2,746
    
    
    
    3,969
    
    
    
    9,099
    
    
    
    8,332Total expenses
    
    
    1,058,851
    
    
    
    982,403
    
    
    
    3,396,063
    
    
    
    2,732,292Income (loss) before income taxes
    
    
    64,532
    
    
    
    50,308
    
    
    
    (54,661
    )
    
    
    136,508Income tax expense
    
    
    25,097
    
    
    
    19,060
    
    
    
    33,350
    
    
    
    51,180Net income (loss)
    
    $
    39,435
    
    
    $
    31,248
    
    
    $
    (88,011
    )
    
    $
    85,328Net income (loss) per share:Basic net income (loss) per share
    
    $
    0.75
    
    
    $
    0.59
    
    
    $
    (1.66
    )
    
    $
    1.63Weighted average number of common shares outstanding
    
    
    52,694,077
    
    
    
    52,697,920
    
    
    
    52,914,156
    
    
    
    52,477,798Diluted net income (loss) per share
    
    $
    0.74
    
    
    $
    0.58
    
    
    $
    (1.66
    )
    
    $
    1.59Weighted average number of common shares and dilutive
potential common shares outstanding
    
    
    53,494,690
    
    
    
    53,816,534
    
    
    
    52,914,156
    
    
    
    53,682,928
  4




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##### 



AMERIGROUP Corporation And Subsidiaries
 
 Condensed Consolidated Statement of Stockholders Equity
 Nine months Ended September 30, 2008
 (Dollars in thousands)
 (Unaudited)
 AccumulatedAdditional
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Retained
    
    
    Treasury Stock
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Loss
    
    
    Earnings
    
    
    Shares
    
    
    Amount
    
    
    EquityBalances at December 31, 2007
    
    
    53,129,928
    
    
    $
    532
    
    
    $
    412,065
    
    
    $
    
    
    
    $
    502,182
    
    
    
    25,713
    
    
    $
    (872
    )
    
    $
    913,907Common stock issued upon exercise
of stock options, vesting of restricted stock grants,
and purchases under the employee stock purchase
plan
    
    
    383,085
    
    
    
    3
    
    
    
    4,587
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,590Compensation expense related to
share-based payments
    
    
    
    
    
    
    
    
    
    
    7,702
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,702Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    1,201
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,201Common stock redeemed for payment of employee
taxes
    
    
    (17,965
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,965
    
    
    
    (597
    )
    
    
    (597
    )Common stock repurchases
    
    
    (842,869
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    842,869
    
    
    
    (22,890
    )
    
    
    (22,890
    )Deferred tax asset related to convertible hedge
instruments
    
    
    
    
    
    
    
    
    
    
    (165
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (165
    )Unrealized loss on available-for-sale securities,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,030
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,030
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (88,011
    )
    
    
    
    
    
    
    
    
    
    
    (88,011
    )Balances at September 30, 2008
    
    
    52,652,179
    
    
    $
    535
    
    
    $
    425,390
    
    
    $
    (2,030
    )
    
    $
    414,171
    
    
    
    886,547
    
    
    $
    (24,359
    )
    
    $
    813,707
  5




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##### 



AMERIGROUP Corporation And Subsidiaries
 
 Condensed Consolidated Statements of Cash Flows
 (Dollars in thousands)
 (Unaudited)
 Nine Months EndedSeptember 30,2008
    
    
    2007Cash flows from operating activities:Net (loss) income
    
    $
    (88,011
    )
    
    $
    85,328Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities:Depreciation and amortization
    
    
    26,459
    
    
    
    23,596Loss on disposal of property, equipment and software
    
    
    442
    
    
    
    34Deferred tax expense (benefit)
    
    
    357
    
    
    
    (5,617
    )Compensation expense related to share-based payments
    
    
    7,702
    
    
    
    10,152Impairment of goodwill
    
    
    8,808
    
    
    
    Changes in assets and liabilities increasing (decreasing) cash flows from
operations:Premium receivables
    
    
    10,480
    
    
    
    (16,937
    )Prepaid expenses, provider and other receivables and other current assets
    
    
    27,610
    
    
    
    (16,332
    )Other assets
    
    
    (942
    )
    
    
    (2,954
    )Claims payable
    
    
    (13,131
    )
    
    
    120,510Accounts payable, accrued expenses and other current liabilities
    
    
    5,342
    
    
    
    23,354Unearned revenue
    
    
    (14,394
    )
    
    
    23,477Other long-term liabilities
    
    
    (98
    )
    
    
    5,947Net cash (used in) provided by operating activities
    
    
    (29,376
    )
    
    
    250,558Cash flows from investing activities:Purchase of restricted investments held as collateral
    
    
    
    
    
    
    (402,812
    )Release of restricted investments held as collateral
    
    
    351,318
    
    
    
    51,494Purchase of convertible note hedge instruments
    
    
    
    
    
    
    (52,702
    )Proceeds from sale of warrant instruments
    
    
    
    
    
    
    25,662Proceeds from sale of available-for-sale securities
    
    
    105,677
    
    
    
    455,399Purchase of available-for-sale securities
    
    
    (89,502
    )
    
    
    (516,336
    )Proceeds from redemption of held-to-maturity securities
    
    
    437,215
    
    
    
    319,641Purchase of held-to-maturity securities
    
    
    (451,058
    )
    
    
    (334,966
    )Purchase of property, equipment and software
    
    
    (27,547
    )
    
    
    (28,313
    )Proceeds from redemption of investments on deposit for licensure
    
    
    44,494
    
    
    
    34,419Purchase of investments on deposit for licensure
    
    
    (49,051
    )
    
    
    (49,841
    )Net cash provided by (used in) investing activities
    
    
    321,546
    
    
    
    (498,355
    )Cash flows from financing activities:Proceeds from issuance of convertible notes
    
    
    
    
    
    
    260,000Borrowings under credit facility
    
    
    
    
    
    
    351,318Repayment of borrowings under credit facility
    
    
    (79,025
    )
    
    
    (221,318
    )Payment of debt issuance costs
    
    
    
    
    
    
    (11,510
    )Net increase (decrease) in bank overdrafts
    
    
    1,553
    
    
    
    (1,397
    )Payment of capital lease obligations
    
    
    (357
    )
    
    
    (676
    )Proceeds from exercise of common stock options
    
    
    4,590
    
    
    
    8,147Repurchase of common stock shares
    
    
    (22,890
    )
    
    
    Tax benefit related to exercise of stock options
    
    
    1,201
    
    
    
    3,387Net cash (used in) provided by financing activities
    
    
    (94,928
    )
    
    
    387,951Net increase in cash and cash equivalents
    
    
    197,242
    
    
    
    140,154Cash and cash equivalents at beginning of period
    
    
    487,614
    
    
    
    176,718Cash and cash equivalents at end of period
    
    $
    684,856
    
    
    $
    316,872Non-cash disclosures:Common stock redeemed for payment of employee taxes
    
    $
    (597
    )
    
    $
    (791
    )Unrealized loss on available-for-sale securities, net of tax
    
    $
    (2,030
    )
    
    $
    Cumulative effect of adoption of Financial Accounting Standards Board
Interpretation No. 48, Accounting for Uncertainty in Income Taxes
    
    $
    
    
    
    $
    9,185Deferred tax asset related to convertible note hedge instruments
    
    $
    (165
    )
    
    $
    19,343
  6




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##### 



AMERIGROUP Corporation And Subsidiaries
 
 Notes to Condensed Consolidated Financial Statements
 (Dollars in thousands, except per share data)
 (Unaudited)
 1. Basis of Presentation
   2. Earnings per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Basic net income (loss) per share:Net income (loss)
    
    $
    39,435
    
    
    $
    31,248
    
    
    $
    (88,011
    )
    
    $
    85,328Weighted average number of common shares outstanding
    
    
    52,694,077
    
    
    
    52,697,920
    
    
    
    52,914,156
    
    
    
    52,477,798Basic net income (loss) per share
    
    $
    0.75
    
    
    $
    0.59
    
    
    $
    (1.66
    )
    
    $
    1.63Diluted net income (loss) per share:Net income (loss)
    
    $
    39,435
    
    
    $
    31,248
    
    
    $
    (88,011
    )
    
    $
    85,328Weighted average number of common shares outstanding
    
    
    52,694,077
    
    
    
    52,697,920
    
    
    
    52,914,156
    
    
    
    52,477,798Dilutive effect of stock options, convertible senior notes and
warrants (as determined by applying the treasury stock method)
    
    
    800,613
    
    
    
    1,118,614
    
    
    
    
    
    
    
    1,205,130Weighted average number of common shares and dilutive
potential common shares outstanding
    
    
    53,494,690
    
    
    
    53,816,534
    
    
    
    52,914,156
    
    
    
    53,682,928Diluted net income (loss) per share
    
    $
    0.74
    
    
    $
    0.58
    
    
    $
    (1.66
    )
    
    $
    1.59
  7




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##### 



AMERIGROUP Corporation And Subsidiaries
 Notes
to Condensed Consolidated Financial Statements  (Continued)
   3. Recent Accounting Standards
 Fair Value Measurements
 Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active
 Accounting for Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).
 Business Combinations
 8




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##### 



AMERIGROUP Corporation And Subsidiaries
 Notes
to Condensed Consolidated Financial Statements  (Continued)
 4. Fair Value Measurements
    Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableIdentical Assets
    
    
    Observable Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash and cash equivalents
    
    $
    684,856
    
    
    $
    684,856
    
    
    $
    
    
    
    $
    Auction rate securities
    
    
    85,198
    
    
    
    4,000
    
    
    
    
    
    
    
    81,198Total assets measured at fair value
    
    $
    770,054
    
    
    $
    688,856
    
    
    $
    
    
    
    $
    81,198
  9




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##### 



AMERIGROUP Corporation And Subsidiaries
 Notes
to Condensed Consolidated Financial Statements  (Continued)
  Fair ValueMeasurementsUsing SignificantUnobservable Inputs(Level 3)AuctionRateSecuritiesBalance at December 31, 2007
    
    $
    Transfers to Level 3
    
    
    92,550Total unrealized losses included in other comprehensive loss
    
    
    (990
    )Balance at March 31, 2008
    
    
    91,560Total unrealized losses included in other comprehensive loss
    
    
    (3,527
    )Settlements
    
    
    (4,150
    )Balance at June 30, 2008
    
    $
    83,883Total unrealized gains included in other comprehensive loss
    
    
    1,315Settlements
    
    
    (4,000
    )Balance at September 30, 2008
    
    $
    81,198
 5. Market Exits
   6. Long-Term Obligations
 Credit Agreement
   10




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##### 



AMERIGROUP Corporation And Subsidiaries
 Notes to Condensed Consolidated Financial Statements  (Continued)
    Convertible Senior Notes
      7. Share Repurchase Program
   11




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##### 



AMERIGROUP Corporation And Subsidiaries
 Notes to Condensed Consolidated Financial Statements  (Continued)
 8. Contingencies
 Legal Proceedings
 Qui Tam
 Qui Tam
  Qui Tam
  Qui Tam
 12




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##### 



AMERIGROUP Corporation And Subsidiaries
 Notes to Condensed Consolidated Financial Statements  (Continued)
 Qui Tam
  Risk Sharing Receivable
   Other Litigation
  13




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##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-looking Statements
   
    
    local, state and national economic conditions, including their effect on the rate
increase process and timing of payments;
    
    the effect of government regulations and changes in regulations governing the healthcare
industry;
    
    changes in Medicaid and Medicare payment levels and methodologies;
    
    liabilities and other claims asserted against us;
    
    our ability to attract and retain qualified personnel;
    
    our ability to maintain compliance with all minimum capital requirements;
    
    the availability and terms of capital to fund acquisitions and capital improvements;
    
    the competitive environment in which we operate;
    
    our ability to maintain and increase membership levels;
    
    demographic changes;
    
    increased use of services, increased cost of individual services, epidemics, the
introduction of new or costly treatments and technology, new mandated benefits, insured
population characteristics and seasonal changes in the level of healthcare use;
    
    our ability to enter into new markets or remain in our existing markets;
    
    our inability to operate new products and markets at expected levels, including, but not
limited to, profitability, membership and targeted service standards;
    
    changes in market interest rates, actions by the Federal
Reserve or any disruptions in the credit markets;
    
    catastrophes, including acts of terrorism or severe weather; and
    
    the unfavorable resolution of pending litigation.
 Other
Information Risk Factors
 14




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##### 



Overview
   
    
    Membership increased 12.2% to approximately 1,714,000 from September 30, 2007 to
September 30, 2008;
    
    Total revenues of $1.1 billion, an 8.8% increase over the third quarter of 2007;
    
    Health benefits ratio (HBR) of 80.1% of premium revenue;
    
    Selling, general and administrative expense ratio of 14.4% of total revenues; and
    
    Began operations on August 1, 2008 in New Mexicos new Coordinated Long-Term Services
(CoLTS) program that constitutes one of the Nations first comprehensive programs to
coordinate long-term care for individuals.
 Revenue Growth
    Operating Costs
 Health Benefits
  15




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##### 



Selling, general and administrative expenses
  Litigation Settlement
 Qui Tam
 Qui Tam Legal
Proceedings
 Market Updates
    Results of Operations
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Premium revenue
    
    
    98.4
    %
    
    
    98.2
    %
    
    
    98.2
    %
    
    
    98.3
    %Investment income and other
    
    
    1.6
    
    
    
    1.8
    
    
    
    1.8
    
    
    
    1.7Total revenue
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Health benefits (1)
    
    
    80.1
    %
    
    
    82.9
    %
    
    
    81.4
    %
    
    
    83.1
    %Selling, general and administrative expenses
    
    
    14.4
    %
    
    
    12.6
    %
    
    
    13.6
    %
    
    
    12.5
    %Income (loss) before income taxes
    
    
    5.7
    %
    
    
    4.9
    %
    
    
    (1.6)
    %
    
    
    4.8
    %Net income (loss)
    
    
    3.5
    %
    
    
    3.0
    %
    
    
    (2.6)
    %
    
    
    3.0
    %
 
 (1)
    
    The HBR is shown as a percentage of premium revenue because there is a
direct relationship between the premium received and the health
benefits provided. 16




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##### 



Three and Nine months Ended September 30, 2008 Compared to Three and Nine months Ended September
30, 2007
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,% Change
    
    
    
    
    
    
    
    
    
    
    % Change2008
    
    
    2007
    
    
    2008-2007
    
    
    2008
    
    
    2007
    
    
    2008-2007Revenues:Premium
    
    $
    1,105.8
    
    
    $
    1,013.6
    
    
    
    9.1
    %
    
    $
    3,282.7
    
    
    $
    2,819.2
    
    
    
    16.4
    %Investment income and other
    
    
    17.6
    
    
    
    19.1
    
    
    
    (7.7
    )%
    
    
    58.7
    
    
    
    49.6
    
    
    
    18.3
    %Total revenues
    
    
    1,123.4
    
    
    
    1,032.7
    
    
    
    8.8
    %
    
    
    3,341.4
    
    
    
    2,868.8
    
    
    
    16.5
    %Expenses:Health benefits
    
    
    885.8
    
    
    
    840.7
    
    
    
    5.4
    %
    
    
    2,672.2
    
    
    
    2,342.9
    
    
    
    14.1
    %Selling, general and administrative
    
    
    161.5
    
    
    
    129.9
    
    
    
    24.3
    %
    
    
    454.1
    
    
    
    357.5
    
    
    
    27.0
    %Litigation settlement
    
    
    
    
    
    
    
    
    
    
    *
    
    
    
    234.2
    
    
    
    
    
    
    
    *Depreciation and amortization
    
    
    8.8
    
    
    
    7.7
    
    
    
    13.8
    %
    
    
    26.5
    
    
    
    23.6
    
    
    
    12.3
    %Interest
    
    
    2.7
    
    
    
    4.0
    
    
    
    (30.8
    )%
    
    
    9.1
    
    
    
    8.3
    
    
    
    9.6
    %Total expenses
    
    
    1,058.9
    
    
    
    982.4
    
    
    
    7.8
    %
    
    
    3,396.1
    
    
    
    2,732.3
    
    
    
    24.3
    %Income (loss) before income taxes
    
    
    64.5
    
    
    
    50.3
    
    
    
    28.3
    %
    
    
    (54.7
    )
    
    
    136.5
    
    
    
    *Income tax expense
    
    
    25.1
    
    
    
    19.1
    
    
    
    31.7
    %
    
    
    33.4
    
    
    
    51.2
    
    
    
    (34.8
    )%Net income (loss)
    
    $
    39.4
    
    
    $
    31.2
    
    
    
    26.2
    %
    
    $
    (88.0
    )
    
    $
    85.3
    
    
    
    *Diluted net income (loss) per common share
    
    $
    0.74
    
    
    $
    0.58
    
    
    
    27.6
    %
    
    $
    (1.66
    )
    
    $
    1.59
    
    
    
    *
 
 *
    
    Not meaningful. Revenues
    17




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##### 



Membership
  September 30,2008
    
    2007Texas (1)
    
    
    462,000
    
    
    
    453,000Tennessee (2)
    
    
    352,000
    
    
    
    185,000Florida
    
    
    228,000
    
    
    
    200,000Georgia
    
    
    201,000
    
    
    
    218,000Maryland
    
    
    161,000
    
    
    
    147,000New York
    
    
    111,000
    
    
    
    114,000New Jersey
    
    
    103,000
    
    
    
    99,000Ohio
    
    
    56,000
    
    
    
    52,000Virginia
    
    
    24,000
    
    
    
    22,000South Carolina
    
    
    9,000
    
    
    
    New Mexico
    
    
    7,000
    
    
    
    District of Columbia (3)
    
    
    
    
    
    
    38,000Total
    
    
    1,714,000
    
    
    
    1,528,000Percentage growth from September 30, 2007 to September 30, 2008
    
    
    12.2
    %
 
 (1)
    
    Membership includes approximately 13,000 aged, blind and disabled
(ABD) members under an ASO contract in Texas as of September 30,
2007.(2)
    
    Membership includes approximately 165,000 members under an ASO
contract in Tennessee as of September 30, 2008. As of October 31,
2008, we will cease providing services to these members.(3)
    
    The contract with the District of Columbia terminated June 30, 2008.  18




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##### 



September 30,Product
    
    2008
    
    2007Temporary Assistance to Needy Families (Medicaid) (1)
    
    
    1,167,000
    
    
    
    1,040,000SCHIP
    
    
    279,000
    
    
    
    270,000ABD (Medicaid) (2)
    
    
    218,000
    
    
    
    172,000FamilyCare (Medicaid)
    
    
    41,000
    
    
    
    41,000Medicare Advantage
    
    
    9,000
    
    
    
    5,000Total
    
    
    1,714,000
    
    
    
    1,528,000
 
 (1)
    
    Membership includes approximately 124,000 members under an ASO contract in Tennessee as of September 30, 2008.(2)
    
    Membership includes approximately 41,000 members under an ASO contract in Tennessee in 2008 and 13,000 ASO
contract members in Texas in 2007. Health benefits expenses
   Selling, general and administrative expenses
   Litigation Settlement
 Qui Tam Qui Tam Legal Proceedings
 19




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##### 



Depreciation and amortization expense
  Interest expense
  Provision for income taxes
 Qui Tam Qui Tam
 Net income (loss)
 Qui Tam
 Liquidity and Capital Resources
  20




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##### 



Credit Agreement
    Convertible Senior Notes
     21




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##### 



Shelf Registration
  Share Repurchase Program
  Cash and Investments
      22




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##### 



Regulatory Capital and Dividend Restrictions
  23




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##### 



Recent Accounting Standards
 Fair Value Measurements
  Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active
 Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).
 Business Combinations
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   24




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##### 



Item 4. Controls and Procedures
   25




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##### 



Part II.  Other Information
 
 Item 1. Legal Proceedings
 Qui Tam
 Qui Tam
  Qui Tam
  Qui Tam
 26




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##### 



Qui Tam
  Risk Sharing Receivable
   Other Litigation
  
 Item 1A. Risk Factors
  27




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##### 



The value of our investments is influenced by varying economic and market conditions, and a
decrease in value could have an adverse effect on our results of
operations, liquidity and financial condition.
    Adverse
credit market conditions may have a material adverse affect on our
liquidity or our ability to obtain credit on acceptable
terms.
  Compliance
with the terms and conditions of our Corporate Integrity Agreement
requires significant resources and, if we fail to comply, we could be
subject to penalties or excluded from participation in government healthcare
programs, which could seriously harm our results of operations,
liquidity and financial results.
 Qui Tam Qui Tam Legal Proceedings.
  28




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##### 



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Maximum numberTotal number of
    
    
    Shares (or Units)Average
    
    
    Shares (or Units)
    
    
    that May Yet BeTotal Number of
    
    
    Price Paid
    
    
    Purchased as Part of
    
    
    Purchased UnderShares (or Units)
    
    
    per Share
    
    
    Publicly Announced
    
    
    the Plans orPeriod
    
    Purchased
    
    
    (or Unit)
    
    
    Plans or Programs (1)
    
    
    Programs (1)July 1 - July 31, 2008
    
    
    23,600
    
    
    $
    25.27
    
    
    
    23,600
    
    
    
    1,276,200August 1 - August 31, 2008
    
    
    53,900
    
    
    
    25.66
    
    
    
    53,900
    
    
    
    1,222,300September 1 - September 30, 2008
    
    
    65,169
    
    
    
    25.34
    
    
    
    65,169
    
    
    
    1,157,131Total
    
    
    142,669
    
    
    $
    25.45
    
    
    
    142,669
    
    
    
    1,157,131
 
 (1)
    
    All of the shares purchased during the third quarter of 2008 were purchased as part of the
Companys existing authorized share repurchase program. The share repurchase program provides for
the repurchase of up to two million shares of our common stock, subject to certain limitations
imposed by our Credit Agreement. On August 7, 2008, the Company entered into a trading plan in
accordance with Rule 10b5-1 of the Exchange Act, to facilitate repurchases of its common stock
pursuant to its share repurchase program (the Rule 10b5-1 plan). The Rule 10b5-1 plan became
effective on September 8, 2008 and expires on January 10, 2009, unless terminated earlier in
accordance with its terms. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 ExhibitNumber
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation of the Company (incorporated by
reference to exhibit 3.1 to our Registration Statement on Form S-3
(No. 333-108831)).3.2
    
    Amended and Restated By-Laws of the Company (incorporated by reference to
exhibit 3.1 to our Current Report on Form 8-K filed on February 14, 2008).4.1
    
    Form of share certificate for common stock (incorporated by reference to
exhibit 4.1 to our Registration Statement on Form S-1 (No. 333-347410)).4.2
    
    Indenture related to the 2.0% Convertible Senior Notes due 2012 dated March 28,
2007, between AMERIGROUP Corporation and The Bank of New York, as trustee
(including the form of 2.0% Convertible Senior Note due 2012) (incorporated by
reference to exhibit 4.1 to our Current Report on Form 8-K filed on April 2,
2007).
 29




---



##### 



ExhibitNumber

    
    Description4.3
    
    
    Registration Rights Agreement dated March 28, 2007, between AMERIGROUP
Corporation, Goldman Sachs, & Co., as representative of the initial purchasers
(incorporated by reference to exhibit 4.2 to our Current Report on Form 8-K filed
on April 2, 2007).*10.1
    
    
    Amendment effective September 1, 2008, to the Health & Human Services Commission
Agreement for Health Services to the STAR, STAR+PLUS, CHIP, CHIP Perinatal
programs effectively extending the contract through August 31, 2009, filed
herewith.*10.2
    
    
    Contract dated August 26, 2008 between the State of New Mexico and AMERIGROUP New
Mexico, Inc. for the period from August 1, 2008 through June 30, 2012, filed
herewith.10.3
    
    
    Amendment effective September 1, 2008, to the Agency for HealthCare
Administration Contract No. FA614 (AHCA Contract No. FA614 Amendment No. 9)
effectively extending the contract through August 31, 2009 (incorporated by
reference to exhibit 10.1 to our Current Report on Form 8-K filed on September 8,
2008).10.4
    
    
    Amendment No. 3 between Georgia Department of Community Health
and AMGP Georgia Managed Care Company, Inc. for the period from July 1, 2008
through June 30, 2009, filed herewith.10.5
    
    
    Amendment No. 4 between Georgia Department of Community Health
and AMGP Georgia Managed Care Company, Inc. for the period from July 1, 2008
through June 30, 2009, filed herewith.*10.6
    
    
    Amendment No. 5 between Georgia Department of Community Health
and AMGP Georgia Managed Care Company, Inc. for the period from July 1, 2008
through June 30, 2009, filed herewith.10.7
    
    
    AMERIGROUP Corporation Amended and Restated Change in Control Benefit Policy
dated July 30, 2008, filed herewith.10.8
    
    
    Settlement Agreement dated as of August 13, 2008, by and among the United States
of America, acting through the United States Department of Justice and on behalf
of the Office of Inspector General of the Department of Health and Human
Services; the State of Illinois acting through the Office of the Illinois
Attorney General; Cleveland A. Tyson; AMERIGROUP Corporation; and AMERIGROUP
Illinois, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report
on Form 8-K on August 14, 2008).10.7
    
    
    AMERIGROUP Corporation Corporate Integrity Agreement (incorporated by reference
to Exhibit 10.2 to our Current Report on Form 8-K filed on August 14, 2008).14.1
    
    
    AMERIGROUP Corporation Code of Business Conduct and Ethics (incorporated by
reference to Exhibit 14.1 to our Current Report on Form 8-K filed on August 14,
2008).31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of
Sarbanes-Oxley Act of 2002, dated October 28, 2008.31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of
Sarbanes-Oxley Act of 2002, dated October 28, 2008.32
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of Sarbanes-Oxley Act of 2002, dated October 28, 2008.
 
 *
    
    The Company has requested confidential treatment of the redacted
portions of this exhibit pursuant to Rule 24b-2, under the Securities
Exchange Act of 1934, as amended, and has separately filed a complete
copy of this exhibit with the Securities and Exchange Commission. 30




---



##### 



Signatures
 Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 AMERIGROUP CorporationBy:
    /s/  James G. CarlsonJames G. CarlsonChairman and Chief
Executive Officer  By:
    /s/  James W. TruessJames W. TruessExecutive Vice President and
Chief Financial Officer  31




---



##### 



EXHIBITS
 ExhibitNumber

    
    Description3.1
    
    
    Amended and Restated Certificate of Incorporation of the Company (incorporated by
reference to exhibit 3.1 to our Registration Statement on Form S-3
(No. 333-108831)).3.2
    
    
    Amended and Restated By-Laws of the Company (incorporated by reference to
exhibit 3.1 to our Current Report on Form 8-K filed on February 14, 2008).4.1
    
    
    Form of share certificate for common stock (incorporated by reference to
exhibit 4.1 to our Registration Statement on Form S-1 (No. 333-347410)).4.2
    
    
    Indenture related to the 2.0% Convertible Senior Notes due 2012 dated March 28,
2007, between AMERIGROUP Corporation and The Bank of New York, as trustee
(including the form of 2.0% Convertible Senior Note due 2012) (incorporated by
reference to exhibit 4.1 to our Current Report on Form 8-K filed on April 2,
2007).4.3
    
    
    Registration Rights Agreement dated March 28, 2007, between AMERIGROUP
Corporation, Goldman Sachs, & Co., as representative of the initial purchasers
(incorporated by reference to exhibit 4.2 to our Current Report on Form 8-K filed
on April 2, 2007).*10.1
    
    
    Amendment effective September 1, 2008, to the Health & Human Services Commission
Agreement for Health Services to the STAR, STAR+PLUS, CHIP, CHIP Perinatal
programs effectively extending the contract through August 31,
2009, filed
herewith.*10.2
    
    
    Contract dated August 26, 2008 between the State of New Mexico and AMERIGROUP New
Mexico, Inc. for the period from August 1, 2008 through
June 30, 2012, filed
herewith.10.3
    
    
    Amendment effective September 1, 2008, to the Agency for HealthCare
Administration Contract No. FA614 (AHCA Contract No. FA614 Amendment No. 9)
effectively extending the contract through August 31, 2009, (incorporated by reference to exhibit 10.1 to our Current Report on
Form 8-K filed on September. 8, 2008).10.4
    
    
    Amendment No. 3 dated October 23, 2008 between Georgia Department of Community Health
and AMGP Georgia Managed Care Company, Inc. for the period from July 1, 2008
through June 30, 2009, filed herewith.10.5
    
    
    Amendment No. 4 dated October 23, 2008 between Georgia Department of Community Health
and AMGP Georgia Managed Care Company, Inc. for the period from July 1, 2008
through June 30, 2009, filed herewith.*10.6
    
    
    Amendment No. 5 dated October 23, 2008 between Georgia Department of Community Health
and AMGP Georgia Managed Care Company, Inc. for the period from July 1, 2008
through June 30, 2009, filed herewith.10.7
    
    
    AMERIGROUP Corporation Amended and Restated Change in Control Benefit Policy
dated July 30, 2008, filed herewith.10.8
    
    
    Settlement Agreement dated as of August 13, 2008, by and among the United States
of America, acting through the United States Department of Justice and on behalf
of the Office of Inspector General of the Department of Health and Human
Services; the State of Illinois acting through the Office of the Illinois
Attorney General; Cleveland A. Tyson; AMERIGROUP Corporation; and AMERIGROUP
Illinois, Inc. (incorporated by reference to Exhibit 10.1 to our Current Report
on Form 8-K on August 14, 2008).10.7
    
    
    AMERIGROUP Corporation Corporate Integrity Agreement (incorporated by reference
to Exhibit 10.2 to our Current Report on Form 8-K filed on August 14, 2008).14.1
    
    
    AMERIGROUP Corporation Code of Business Conduct and Ethics (incorporated by
reference to Exhibit 14.1 to our Current Report on Form 8-K filed on August 14,
2008).31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of
Sarbanes-Oxley Act of 2002, dated October 28, 2008.31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of
Sarbanes-Oxley Act of 2002, dated October 28, 2008.32
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of Sarbanes-Oxley Act of 2002, dated October 28, 2008.
 
 *
    
    The Company has requested confidential treatment of the redacted
portions of this exhibit pursuant to Rule 24b-2, under the Securities
Exchange Act of 1934, as amended, and has separately filed a complete
copy of this exhibit with the Securities and Exchange Commission. 32